New Delhi: Business came to a halt at the crisis-ridden National Spot Exchange Ltd (NSEL) Tuesday after the government banned trade of its e-series contracts of commodities such as gold and silver to ensure that the exchange first settles Rs 5,600 crore in dues to investors.

The NSEL, which had suspended trading of all other contracts on July 31, stopped the e-series contracts in the morning in anticipation of the government's order, leading to a complete halt of operations on the exchange.

The e-series contracts allow retail investors to trade in gold, silver, copper, zinc, lead, nickel and platinum in demat form. The exchange has assured investors they can convert their demat stocks to physical form.

"We have stopped trading in e-series contracts on NSEL. A notification will be issued in a day or two," Food and Consumer Affairs Minister K V Thomas said.

"We decided to stop trade in e-series as we want to see first NSEL settles the dues," he said, adding that the government is trying its best to ensure that there is no panic among investors and that dues are paid.

Separately, NSEL said it "has suspended trading of contracts in e-series w.e.f. August 6 till further notice." A company spokesperson said all trading was suspended on the NSEL today.

Shares of Financial Technologies (India) Ltd (FTIL), the main promoter of NSEL, declined 20 percent on the BSE today, while group entity MCX fell 10 percent.

E-series contracts are a unique market segment, which function like the cash segment in equities and offer commodities in demat form in smaller denominations. They contributed about 40 percent of NSEL's Rs 18,315 crore turnover in June.

To safeguard investor interest, the exchange said that "people holding stock can apply for converting to physical and the same will be facilitated by the exchange. People can also continue to hold the stock in demat form."

The NSEL suspended trading in all its one-day forward contracts, except e-series products, on July 31, raising concerns about possible defaults in payments to investors.

The Consumer Affairs Ministry has entrusted the Forward Markets Commission (FMC), the commodity market regulator, to oversee the settlement and is in the process of giving more powers to the regulator for this purpose.

"FMC is having full control of the situation. If more teeth is to be given to settle NSEL issue, we will give that to regulator through necessary amendments," the minister said.

On Monday, the NSEL said a payment schedule will be announced by August 14 and it set up a four-member panel to advise and monitor the five-month payout process.